Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. pinnochio co. is a furniture manufacturer that mil

Pinnochio Co. is a furniture manufacturer that mills its own lumber. The company has two...

60.1K

Verified Solution

Question

Accounting

Pinnochio Co. is a furniture manufacturer that mills its own lumber. The company has two divisions that operate as distinct profit centers: milling and assembly.

The milling division purchases timber and mills it into lumber, most of which it sells internally to the assembly division at a negotiated transfer price per board foot each year. The assembly division then produces bedroom furniture sets from the lumber, which it sells for $2,000 per set. Each bedroom set requires approximately 200 to 400 board feet of lumber. Neither division has any beginning inventory as of January 1, 2022.

During 2022, the milling division sold 210,000 board feet of lumber to the assembly division. Assembly then incurred an additional $400,000 in costs to convert all of that transferred lumber into 700 finished bedroom sets. Assume there are no further selling, general, or administrative costs at the assembly division. The milling division has a tax rate of 15% and the assembly division has a tax rate of 25%.

If the assembly division sold all of its finished goods inventory during the year and reported after-tax operating income of $450,000, then what was the internal transfer price per board foot for 2022? 

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students